The European Commission has approved, under the EU Merger Regulation, the acquisition of Polish integrated oil and gas company LOTOS Group by PKN Orlen.
“Access to fuels at competitive prices is important for businesses and consumers alike,” commented Executive Vice President Margrethe Vestager, in charge of competition policy. “Today, we can approve the proposed acquisition of Lotos by PKN Orlen because the extensive commitments offered by PKN Orlen will ensure that the relevant Polish markets remain open and competitive and that the merger will not lead to higher prices or less choice for fuels and related products for businesses and consumers in Poland and Czechia.”
Today’s decision follows an in-depth investigation of the proposed merger by the Commission, which combines PKN Orlen and LOTOS Group, both active in Poland, where they both own refineries and also have activities in several other Central and Eastern European and Baltic countries. Following its investigation, the Commission had concerns that the transaction, as initially notified, would have harmed competition.
To address the Commission’s concerns, PKN Orlen offered to divest a 30 per cent stake in Lotos’ refinery accompanied by strong governance rights, with the purchaser having the right to approximately half of the refinery’s diesel and gasoline production, while also giving the purchaser access to important storage and logistics infrastructure. Furthermore, it offered to divest nine fuel storage depots to an independent logistics operator and to build a new jet fuel import terminal in the Polish city of Szczecin, which would be transferred to the independent logistics operator on completion. PKN Orlen also promised to sell Lotos’s 50 per cent stake in the jet fuel-marketing joint venture that it has with BP, to continue to supply the joint venture, and to give the joint venture access to storage at two airports in Poland.
The Commission, therefore, concluded that the transaction, as modified by the commitments, would no longer raise competition concerns. This decision is conditional upon the full compliance with the commitments.
The acquisition of the LOTOS Group by PKN ORLEN was initiated in February 2018 by signing a letter of intent with the State Treasury, holding 53.19 per cent of voting rights at the General Meeting of LOTOS Group. In July 2019, PKN ORLEN filed a formal application for the European Commission’s approval of the concentration.
The merger with LOTOS Group is intended as an important step towards building a strong multi-utility group with international potential, successfully competing across markets. The merger would strengthen its participants’ bargaining power in price negotiations with trade partners in the US, the Middle East or Russia while facilitating the establishment of new business relationships. The transaction would play a major role in ensuring the fuel and energy security for Poland and for entire Central and Eastern Europe.